Philip Hammond in U-turn over Budget plans to increase NI

Philip Hammond has performed a dramatic U-turn a week after unveiling his first budget as Chancellor, cancelling a controversial rise in national insurance for the self-employed.

In a letter to MPs published 20 minutes before Prime Minister’s Questions, Mr Hammond accepted that the proposals broke the “spirit” of a 2015 Conservative manifesto commitment not to raise income tax or national insurance.

The U-turn leaves a £2 billion hole in a budget that the Chancellor had said was designed to be balanced and not add additional borrowing to the public finances.

Dozens of Tory backbenchers had condemned the policy, with one minister saying the government should apologise to voters.

In his letter to Conservative MPs on Wednesday, Mr Hammond said it was “very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made.”

The Chancellor said that a ‘tripe-lock’ put into legislation in 2015 made clear that Class 1 national insurance for employees would not rise, but did not mention Class 4 national insurance.

But Mr Hammond added that “in light of the debate over the last few days it is clear that compliance with the ‘legislative’ test of the manifesto commitment is not adequate.”